IMF upbeat as global economy enjoys a growth spurt
The world economy is enjoying its most widespread and fastest growth spurt since a temporary bounce back from the global recession in 2010, the International Monetary Fund said on Tuesday, as it released a series of upward revisions to its economic forecasts.
In a rare upbeat World Economic Outlook, published at the start of the annual meetings of the IMF and World Bank in Washington, the fund added that the unexpectedly good news had further to run in 2018 and higher investment was also beginning to improve the longer-term economic prognosis.
The last time the global economy grew so fast was in 2010 as the world economy staged a temporary recovery from the 2008-09 financial crisis, so this year’s performance was significantly stronger, according to Maurice Obstfeld, chief economist of the IMF.
“This is not bounce back from a sharp deceleration, this is an acceleration from the fairly tepid growth rates of recent years, so that’s really good news,” he told the FT in an interview ahead of the report’s publication.
The IMF estimates that the world economy will expand 3.6 per cent in 2017, up from 3.2 per cent recorded last year, and it is likely to grow 3.7 per cent in 2018, the IMF predicted. These growth rates are better than the norm for this decade and finally back to the long-term average of the past 30 years.
The upgraded growth forecasts came alongside predictions of low inflation across the world, helping to boost household incomes, a continuation of loose monetary policies and an end to fiscal austerity in most countries, the IMF said.
China’s economy is also performing better than expected on the back of easy credit and copious public investment. The forecasts for the US were cut marginally, reflecting a weak first quarter of this year and the fund’s view that a large fiscal stimulus is now less likely than it thought in April.
The most significant upgrades to the fund’s forecasts were recorded for the eurozone, which is accelerating strongly as confidence has improved and credit supply has returned to normal.
Despite the strength of its largest trading partner, the UK economy is described as an “exception” to the improved 2017 outlook, with its prospects currently saddled by Brexit uncertainties limiting spending and hitting incomes.
Although the recovery was now broad, not all countries were enjoying the benefit, with some smaller emerging economies, particularly fuel exporters and nations suffering from drought or political instability.
Mr Obstfeld said: “In 2017 nearly a quarter of emerging market and developing countries are expected to have negative per-capita growth rates so that’s a sobering outlook.”
Global trade imbalances have also continued to reduce in severity with China’s trade surplus falling as the world’s largest economy sucks in more imports and some European surpluses decline as domestic spending also increases.